Energies

Crude Oil continued to show signs of weakness this week even while faced with news of the first inventory drawdown in over a month from the EIA report released Wednesday. The seemingly bullish data however was not enough to eclipse the surprising build numbers for the Distillates (Heating Oil, Diesel, Jet Fuel). With hefty Heating Oil supply builds the Crude Oil market was finally able to break down through support at 55.75 on an intra-day basis during Friday?s trading.

Winter is here as of this weekend and it is expected to stick around this time. That being said, most analysts are awaiting the next couple of EIA reports to see if the Distillate refineries that are running at 86% capacity at this time can keep up with the inevitable increase in demand. This next report however should not reflect the new chilly conditions that struck on the way into the weekend so it is reasonable to think that we may see more Bears in the market for the next week. I expect to see a run up in the Crude Oil market of 1.00 to 1.50 ahead of the next inventory report this Wednesday because of either the anticipation of possible bullish EIA data or the technical bounce that typically occurs after the market breaks any real areas of support.

Financials

Stocks
Stocks rallied most of the week and then ran into resistance just below 10,800 on the Dow.  I keep hearing and reading all kinds of rosy outlooks for this Christmas season and I don't want to be a Scrooge, but I do not share their optimism.  We did very well with our Nov. Dow Bull call 105-107 spread that expired at max profit today.  And we are now recommending a put spread on the Russell 2000 as a way to ?hedge?against a disappointing Christmas season.  I did a study this week that I would like to mention.  I compared Monthly charts of the DJIA, S&P 500, Nasdaq 100, the Russell 2000, and here is what I found.  The first thing that I noticed is the Nasdaq is nowhere near the 2000 highs, it is currently 65% off of its 2000 high.  This is in sharp contrast to the Russell 2000 which is now 12% higher than the 2000 high.  The Dow too is near its 2000 highs, and the S&P 500 is about 21% off of its 2000 high.  So what does all this mean?  I am a contrarian and that means I like to buy laggards rather than leaders.  So for me I will be spreading long Nasdaq contracts against short Russell 2000 and or Dow contracts.

Bonds
Bonds seem to be magnetically attracted to the 112 handle.  If Bonds fall below they snap back up and if Bonds try to break out to the upside they get pulled back down.  Now with the ECB possibly raising rates on Dec. 1, Bonds really don't seem to know what to do.  Overall it seems that a rally is trying to get some legs and I would not be surprised to see it break the attraction to 112 this week. 

Metals

What a week for metals!  Silver managed to run up to and through $8.00, and despite my concern about gold hitting resistance at 480, it managed to kick right through that and make new highs.  Platinum traded briefly at the magic $1000 per oz. level this week, and Palladium continued higher as well.  All of this in the face of a higher Dollar!  Bottom line right now is metals are hot.  Copper fell just 2 points short of hitting my target of 200 this week and I suspect it will be well above that by the end of this next week.

Rumors persist in the Copper pits about a massive Asian short position that is though to be in excess of 200,000 tons of copper which is roughly 16,000 contracts on the Nymex.  That means that the position is losing $4,000,000 for every cent that copper prices move up...ouch!  So this means that a huge short squeeze is on and we won't see a top until they flush this position out.  Many people speculate that the Chinese government is behind the position but facts are few and far between for now.  This will be a classic buy the rumor sell the fact type of market.  Buying long on this rumor only to reverse and go short once real news is broken on this story, will almost certainly be the way to play this.      

Grains

I think I should have continued to ignore the Grains.  These markets just cannot get a rally started for anything.  I am now holding a March Wheat 330 - 370 bull call spread that we paid about 8 cents for ($400).  This could be a good trade, if wheat can get a post harvest rally going.  Overall I must continue to say that grains are a slow mover at best this year.

Meats

As much as I want to believe that this is the beginning of the downtrend I?ve been touting for a month, I?m not sold as of yet. The Cattle markets have really failed to break any key support levels and demand from the packers is very healthy. I?m going to stay on the sidelines for now until I see some confirmation of this past weeks retreat. The Hogs and Bellies finished the week on an up note but short on buyers throughout trading last week. I expect to see some follow through over the next week which will be helpful for our Lean Hog put spread.

Softs

Oj continued lower this week and is on its way to testing the 115 level i mentioned last week.  Look for that to hold in the short term but longer term we could test 100 if we have a mild winter in Florida. Cocoa had a strong breakout to the upside today but I have seen this too many times to be suckered in again.  Of course you know that means this time it will really go!  Being long the March 1500 calls is the only way I would bother with this market right now.  If we confirm todays move next week then I might change my tune but for now I a weary of this being another fakeout rather than a breakout.  Coffee took a turn lower this week but seems to have stabilized now and I expect a turn higher this coming week.  Sugar has been about as exciting as the grain markets this year and I do not expect much out of it for the remainder of this year.  It is likely to continue to drift slightly higher but not worth chasing.  Cotton continued to drift lower this week.  We need to see 52 hold support on the March contract this week or I fear Cotton could really break down.

Forex Currencies

EUR/USD
The Euro is trying to stabilize above 116.  Fridays news of a possible ECB rate hike is welcome news for bulls and could turn the tide back in favor of the Euro.  Look for a move above 118.50 to confirm this.

USD/CHF
We did see my 132.50 target hit this week and we are now seeing a bit of a pullback from there.  Longterm a consolidation between 130 ? 133 should be good for this market.

GBP/USD
Well the Pound broke through support and is now trending lower.  This was a major support level and now that we are through it, it opens the door to what could be a big move towards 160.00.  Get short and hang on for a wild ride.

USD/JPY
The Yen did manage to extend its rally.  I must continue to say that this market needs to slow down and consolidate this rally or risk a rather ugly breakdown.  Sell stops at 117.50 are a nice way to catch a breakdown if we see one.

AUD/USD
The Aussie has now managed to find some support at the 7300 level.  The You would think that the strength in metals and other commodities would have turned this currency higher but for now the trend is still down.

USD/CAD
The Canadian got close to 120 before backing off.  This market continues to trade rather slowly and act ?tired?.  Overall I am not nearly as excited about this market as I was just a few weeks ago.

USD/MXN
The Peso also ran straight for my target of 10.60 and bounced.  From where I sit it seems this market is going to continue lower for the time being.  Nest target is 10.53